Don't let people discourage you if you want to go! I travelled on a family vacation to Hawaii from the east coast when my son was 2, and we are doing it again this fall with my kids now age 3 and 6. My then-2 year old did fine on the flight, and I'm sure my kids will do fine this time too. It is long, you just need to be prepared with electronic games and lots of snacks.
If you haven't been to Hawaii before, I suggest you stay on Oahu. There is the most to do on Oahu - the Polynesian Cultural Center and the Arizona Memorial. Plus rent a car one day and drive the entire way around the island, stopping at the Dole Pineapple plantation.
The flights are also best in and out of Oahu, they are pretty limited to the other islands.
Don't get me wrong - I love the other islands - Maui is very restful, with mostly beaches and not a lot of other things to do. Kau'i is pretty undeveloped and very pretty. But if you've never been to Hawaii before, Oahu is the place to start, IMO.
Airfare is expensive right now. We didn't find a way around that. We are staying at a Marriott resort outside of the main city on Oahu this time, because we'd rather have a small suite for the price of a single room on Waikiki beach. More space for us to spread out with the kids. But it does mean that we'll need a rental car for the week, whereas if you stayed in Waikiki, you probably wouldn't need a car except for the one day if you do the island drive. So that's a trade-off you'll want to think about.
This is where we are staying, and I can't WAIT! http://www.marriott.com/hotels/travel/hnlko-marriotts-ko-...